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An advice game with reputational and career concerns

Author

Listed:
  • Kunio Tsuyuhara

    (University of Calgary)

Abstract

I analyze a two-period advice game in which the decision maker chooses to retain or replace the advisor after the first period. The potential replacement creates career concerns for the advisor and thus creates incentives to misinform the decision maker. When the career concern is sufficiently strong, the advisor always lies. I characterize the condition on which the decision maker can induce truthful report by committing to a stochastic retention rule. I show that the decision maker's expected payoff is decreasing with the advisor's level of career concern.

Suggested Citation

  • Kunio Tsuyuhara, 2012. "An advice game with reputational and career concerns," Economics Bulletin, AccessEcon, vol. 32(4), pages 3480-3487.
    • Handle: RePEc:ebl:ecbull:eb-12-00633
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P335.pdf
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    References listed on IDEAS

    as
    1. Andrea Prat, 2005. "The Wrong Kind of Transparency," American Economic Review, American Economic Association, vol. 95(3), pages 862-877, June.
    2. Jeffrey C. Ely & Juuso Välimäki, 2003. "Bad Reputation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 785-814.
    3. Gibbons, Robert & Murphy, Kevin J, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 468-505, June.
    4. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 183-198.
    5. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 169-182.
    6. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 183-198.
    7. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cheap talk; Reputation; Career Concerns;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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